SEMIANNUAL REPORT
MARCH 31, 1996
REYNOLDS FUNDS
100% NO-LOAD MUTUAL FUNDS
REYNOLDS
BLUE CHIP GROWTH FUND
SEEKING LONG-TERM CAPITAL APPRECIATION, WITH CURRENT INCOME A SECONDARY
OBJECTIVE
REYNOLDS
OPPORTUNITY FUND
SEEKING LONG-TERM CAPITAL APPRECIATION
REYNOLDS
U.S. GOVERNMENT BOND FUND
SEEKING A HIGH LEVEL OF CURRENT INCOME
REYNOLDS
MONEY MARKET FUND
SEEKING A HIGH LEVEL OF CURRENT INCOME CONSISTENT WITH A STABLE NET ASSET VALUE
REYNOLDS FUNDS
Dear Fellow Shareholders: May 29, 1996
The Reynolds Blue Chip Growth and Opportunity Funds had strong
appreciation for the twelve months ended March 31, 1996:
April 1, 1995 through March 31, 1996
REYNOLDS OPPORTUNITY FUND +31.1%
REYNOLDS BLUE CHIP GROWTH FUND +29.9%
These Funds also had strong appreciation for the twelve months ended April
30, 1996:
May 1, 1995 through April 30, 1996
REYNOLDS OPPORTUNITY FUND +41.9%
REYNOLDS BLUE CHIP GROWTH FUND +29.1%
VALUATIONS
The stocks that are held in the Blue Chip and Opportunity Funds are currently
reasonably valued. One of the best measures of valuation for high quality growth
stocks is:
The ratio of a company's growth rate to its price/earnings ratio (p/e ratio).
In the past, a high quality growth stock has been high priced when it was valued
at a p/e ratio which was twice its growth rate. It has been reasonably valued
when it was valued at a p/e ratio the same as or less than its growth rate.
Currently, our high quality growth stocks are reasonably valued as they
generally are selling at p/e ratios that are the same as or less than their
growth rates.
Another useful measure of valuation is:
The p/e ratio of the stock market averages. Over the last seventy five
years the U.S. stock market has been valued at an average p/e ratio of 16
times earnings. The U.S. stock market is currently valued at a p/e ratio of
16 times next twelve months estimated earnings. The U.S. stock market is
currently valued at about its normal average historical valuation and is at
an attractive valuation for long-term purchases.
A useful factor for valuation analysis is:
The level of short-term interest rates: When short-term interest rates
approach 10%, the valuations of stocks are affected as some investors decide
that they would rather have the surer return that shorter term money market
instruments offer, rather than the more uncertain higher return that stocks
might provide. However, inflation currently is at a low level and short term
interest rates are around 5%. This is a positive factor for stocks.
THE REYNOLDS BLUE CHIP GROWTH FUND
The Blue Chip Fund has investments in many of the premier larger worldwide
growth companies. These companies have proven management, leading research,
outstanding products, strong financial structures and high profitability. In
addition, many of these companies are not significantly affected by economic
fluctuations and investors don't become overly concerned about them during
uncertain periods. The probabilities highly favor that the diversified group of
industry leading companies held in the Blue Chip Fund will remain industry
leaders, continue to strongly increase their earnings and continue to
significantly increase future shareholder wealth.
The Blue Chip Fund's return was +3.3% for the three months ended March 31,
1996 and +7.4% for the four months ended April 30, 1996. The Blue Chip Fund's
return was +56.0% for the five years ended March 31, 1996 and +63.3% for the
five years ended April 30, 1996. These were average annual compounded rates of
return of +9.3% and +10.3%, respectively. The Blue Chip Fund increased +115.2%
from August 12, 1988 (effective date of the Fund's registration statement)
through March 31, 1996 and increased 123.8% from August 12, 1988 through April
30, 1996. These were average annual compounded rates of return of +10.6% and
+11.0%, respectively.
THE REYNOLDS OPPORTUNITY FUND
The Opportunity Fund emphasizes high quality investments in small to medium
size, rapidly growing companies. The Opportunity Fund has investments in many of
the best emerging growth companies worldwide. The Fund generally invests in
companies which already have proven themselves in the marketplace and already
are leaders in their industries. Generally these companies have sales of $75
million to $1 billion or more and are demonstrating strong earnings growth. We
are making a high probability bet with the companies in the Opportunity Fund,
just as we are with the companies in the Blue Chip Fund, that the majority of
the companies within a well diversified group of proven worldwide leading
companies will continue to be leaders and strongly increase their earnings and
shareholder wealth in the future.
The Opportunity Fund's return was +3.0% for the three months ended March 31,
1996 and +11.7% for the four months ended April 30, 1996. The Opportunity Fund's
return was +60.1% for the three years ended March 31, 1996 and +81.5% for the
three years ended April 30, 1996. These were average annual compounded rates of
return of +17.0% and +22.0%, respectively. The Fund increased +43.6% from
January 30, 1992 (effective date of the Fund's registration statement) to March
31, 1996 and increased +55.7% from January 30, 1992 to April 30, 1996. These
were average annual compounded rates of return of +9.1% and +11.0%,
respectively.
THE REYNOLDS U.S. GOVERNMENT BOND FUND
The Reynolds U.S. Government Bond Fund emphasizes high quality investments in
U.S. Treasury Bonds, Treasury Notes and Treasury Bills of varying maturities. As
of March 31, 1996, the assets were invested approximately 76% in U.S. Treasury
Securities and 24% in high quality cash equivalents.
The Bond Fund had a dollar weighted average maturity of 2.3 years on March
31, 1996. The average maturity of the bonds in the Fund is continually
reevaluated and adjusted based on short- and long-term economic, inflation and
interest rate forecasts.
THE REYNOLDS MONEY MARKET FUND
As of March 31, 1996, the assets of the Reynolds Money Market Fund were
invested approximately 54% in high quality commercial paper, 26% in Federal
Agencies, and 20% in high quality cash equivalents. As of March 31, 1996, the
dollar weighted average days to maturity of the Money Market Fund was 24 days.
The Reynolds Money Market Fund's yield is usually higher than inflation. Its
yield is usually higher than or approximately the same as most brokerage firm
sponsored money market funds because those funds typically have higher expense
structures due to their higher marketing costs. The Reynolds Money Market Fund's
yield is almost always higher than rates paid by most bank accounts. The rates
paid by banks are lower because banks typically have higher overhead.
For ease of redemption, the Money Market Fund offers: (1) free check writing
(in amounts of $500 or more); or (2) telephone redemption where either a check
is mailed to the shareholder, or money may be wired to the shareholder's bank
account ($10.00 wiring charge).
ECONOMIC DISCUSSION
THE WORLD ECONOMY
Most economies around the world are enjoying steady growth. Strong worldwide
growth patterns are forecast for many industries in the next few years. There
are more than 1.5 billion people in the world who will be experiencing a higher
standard of living as capitalism grows and communism declines in China, Eastern
Europe and Russia. Many other countries, such as India and Latin America, have
rapidly emerging middle classes, which desire western goods and services and
governments that are encouraging foreign investments. The Blue Chip and
Opportunity Funds are well positioned to participate in these strong worldwide
growth trends through their investments in U.S. headquartered and foreign
headquartered companies.
THE U.S. ECONOMY
Alan Greenspan, the Chairman of the Federal Reserve Board, recently remarked
that "The U.S. economy remains basically on track for sustained growth". He
forecasts continued moderate, but not excessive, growth and inflation. The U.S.
economy is now performing extremely well with low unemployment. Most key
indicators such as auto sales, housing demand and manufacturing are consistent
with moderate, but sustainable, economic growth. In its latest survey, the
Federal Reserve said retail sales and manufacturing activity picked up
moderately, while manufacturers' inventories were generally within expectations.
Gross Domestic Product (GDP) is forecast to increase 2.5% in 1996 after
increasing 2.0% in 1995.
U.S. INFLATION
U.S. inflation is at its lowest level since the 1960s as the Federal Reserve
continues to succeed in keeping inflationary pressures down. The Federal Reserve
has been willing to act at the first sign that a rise in inflation could be
near. This policy allows the Federal Reserve to use milder rather than harsher
remedies which often stop economic growth later on. Also, there seems to be
enough hesitation on the part of consumers that demand for goods shouldn't be
higher than supply. Rising business investment in efficient plant and equipment
should help to prevent inflation from quickening its pace. The most recent
Federal Reserve survey found that price increases were modest "with only
scattered reports of wage pressures despite continued tight labor markets and
somewhat stronger economic growth". U.S. inflation is estimated to increase at a
manageable 2.8% rate in 1996 after increasing at a 2.5% rate in 1995. As a
result, near term monetary policy should remain unchanged.
INFORMATION ABOUT THE REYNOLDS FUNDS
TAX BASIS REPORTING: The cost basis for all redemptions of shares is reported
annually.
TO SPEAK TO A FUND REPRESENTATIVE REGARDING QUESTIONS, CURRENT DAILY NET
ASSET VALUES AND CURRENT ACCOUNT INFORMATION: call 1-800-773-9665 and press "0"
during normal business hours.
FOR AUTOMATIC CURRENT ACCOUNT INFORMATION AND CURRENT DAILY NET ASSET VALUES
FOR SHAREHOLDERS: call 1-800-773-9665 (twenty-four hours-a-day, seven days-a-
week).
SHAREHOLDERS STATEMENT FREQUENCY: Individual Fund statements are sent
whenever a transaction occurs. Consolidated statements summarizing all Funds
held by a shareholder are sent quarterly.
NEWSPAPER LISTING OF NET ASSET VALUE: The Blue Chip Fund is listed
alphabetically, with the symbol Rey BC, ReynBlCh, or Rnlds Bl Ch Gth, in most
major daily newspapers including Investor's Business Daily, USA Today and The
Wall Street Journal. The Opportunity Fund is listed in USA Today. The
Opportunity Fund and the U.S. Government Bond Fund will be listed in other
newspapers once they have either $25 million of net assets or 1,000
shareholders.
NASDAQ SYMBOL FOR THE BLUE CHIP FUND: RBCGX
THE REYNOLDS FUNDS ARE 100% NO-LOAD: No front end sales commissions or
redemption fees are charged.
THE REYNOLDS FUNDS DO NOT HAVE A 12(B)-1 PLAN: No marketing fees are charged
to the Funds.
MINIMUM INVESTMENT: $1,000 ($100 for additional investments - except for the
Automatic Investment Plan which is $50).
PROTOTYPE PLANS FOR RETIREMENT PLANS: All types are offered.
AUTOMATIC INVESTMENT PLAN: There is no charge to automatically debit your
checking account or your account in any of the Reynolds Funds at periodic
intervals to make automatic purchases in any of the Reynolds Funds. This is
useful for dollar cost averaging.
SYSTEMATIC WITHDRAWAL PLAN: For shareholders with a minimum starting balance
of $10,000, there is no charge to automatically redeem shares ($100 minimum) in
any of the Reynolds Funds as often as monthly and send a check to you or wire to
your bank account.
EXCHANGES OR REGULAR REDEMPTIONS: As often as desired - no charge.
One hundred percent of our firm's pension plan is invested in the Reynolds
Funds. We appreciate your continued confidence in the Reynolds Funds and would
like to welcome our new shareholders. We look forward to strong results in the
future.
Sincerely,
/s/ Frederick L. Reynolds
Frederick L. Reynolds
President
80 East Sir Francis Drake Blvd. Larkspur, CA 94939 415-461-7860
Reynolds Blue Chip Growth Fund
STATEMENT OF NET ASSETS
March 31, 1996 (Unaudited)
QUOTED
SHARES MARKET VALUE
------ ------------
COMMON STOCKS -- 99.6% (A)<F2>
AUTOMOTIVE -- 0.1%
500 Chrysler Corp. $31,125
BANKS -- 0.8%
500 BankAmerica Corp. 38,750
500 Bank of New York Co., Inc. 25,750
500 Citicorp 40,000
500 Wells Fargo & Co. 130,500
----------
235,000
BEVERAGES -- 8.4%
500 Anheuser-Busch Companies, Inc. 33,687
12,500 The Coca-Cola Company 1,032,812
20 The Earthgrains Company 598
20,500 PepsiCo, Inc. 1,296,625
-----------
2,363,722
BIOTECHNOLOGY -- 1.5%
6,000 Amgen Inc.*<F1> 348,750
617 Chiron Corp.*<F1> 60,620
-----------
409,370
BUILDING -- 1.3%
7,500 The Home Depot, Inc. 359,062
CHEMICALS -- 0.3%
500 Dow Chemical Co. 43,437
500 E.I du Pont de Nemours & Co. 41,500
-----------
84,937
COMPUTER NETWORKING -- 9.0%
15,000 3Com Corp.*<F1> 598,125
4,000 Ascend Communications, Inc.*<F1> 215,500
13,000 Bay Networks, Inc.*<F1> 399,750
4,000 Cabletron Systems, Inc.*<F1> 265,000
23,000 Cisco Systems Inc.*<F1> 1,066,625
-----------
2,545,000
COMPUTER & PERIPHERALS -- 2.7%
1,000 Compaq Computer Corp.*<F1> 38,625
4,500 Hewlett-Packard Co. 423,000
2,000 International Business Machines Corp. 222,250
2,000 Sun Microsystems, Inc.*<F1> 87,500
----------
771,375
COMPUTER SOFTWARE & SERVICES -- 8.0%
2,500 Computer Associates International, Inc. 179,063
14,250 Microsoft Corp.*<F1> 1,469,531
10,250 Oracle Corp.*<F1> 483,031
2,000 PeopleSoft, Inc.*<F1> 115,000
1,000 Sybase, Inc.*<F1> 23,250
-----------
2,269,875
DRUGS -- 17.8%
2,500 Bristol-Myers Squibb Co. 214,063
9,000 Eli Lilly & Co. 585,000
24,100 Merck & Co., Inc. 1,500,225
16,500 Pfizer Inc. 1,105,500
20,000 Schering-Plough Corp. 1,162,500
4,500 Warner-Lambert Co. 464,625
-----------
5,031,913
ELECTRICAL EQUIPMENT -- 1.4%
2,000 Emerson Electric Co. 161,500
3,000 General Electric Co. (U.S.) 233,625
----------
395,125
ELECTRONICS -- 0.2%
4,000 Teradyne, Inc.*<F1> 67,000
ENERGY --1.8%
500 Amoco Corp. 36,125
500 Chevron Corp. 28,062
500 Exxon Corp. 40,813
2,000 Mobil Corp. 231,750
1,000 Royal Dutch Petroleum Co. (ADR) 141,250
500 Schlumberger Ltd. 39,563
----------
517,563
ENGINEERING/CONSTRUCTION -- 0.1%
500 Fluor Corp. 34,125
FINANCIAL SERVICES -- 0.9%
500 American Express Co. 24,687
500 Diebold, Inc. 19,813
6,000 Federal National Mortgage Association 191,250
500 Intuit Inc.*<F1> 22,500
----------
258,250
FOODS -- 5.0%
500 Campbell Soup Co. 30,437
500 CPC International Inc. 34,688
1,000 General Mills, Inc. 58,375
5,000 Kellogg Co. 378,750
10,000 Philip Morris Companies Inc. 877,500
1,000 Sara Lee Corp. 32,625
----------
1,412,375
FOOD WHOLESALERS -- 0.1%
1,000 Sysco Corp. 32,875
GROCERY STORES -- 0.1%
1,000 Albertson's, Inc. 37,125
HEALTH MAINTENANCE ORGANIZATIONS --2.4%
3,000 Oxford Health Plans, Inc.*<F1> 263,250
4,500 United HealthCare Corp.*<F1> 276,750
2,750 U.S. Healthcare, Inc. 126,156
----------
666,156
HOUSEHOLD PRODUCTS -- 7.6%
2,000 American Home Products Corp. 216,750
8,500 Colgate-Palmolive Co. 661,937
5,000 Gillette Company 258,750
12,000 Procter & Gamble Co. 1,017,000
-----------
2,154,437
INSURANCE -- 1.8%
3,750 American International Group, Inc. 351,094
1,000 General Re Corp. 145,750
----------
496,844
MACHINERY -- 0.1%
500 Caterpillar Inc. 34,000
MEDICAL SUPPLIES -- 7.2%
14,500 Abbott Laboratories 590,875
15,500 Johnson & Johnson 1,429,875
-----------
2,020,750
OFFICE EQUIPMENT & SUPPLIES -- 0.7%
500 Avery Dennison Corp. 27,000
6,000 Office Depot, Inc.*<F1> 117,750
500 Xerox Corp. 62,750
----------
207,500
PAPER & FOREST PRODUCTS -- 0.9%
500 Georgia-Pacific Corp. 34,688
2,780 Kimberly-Clark Corp. 207,110
----------
241,798
PHOTOGRAPHY -- 0.1%
500 Eastman Kodak Co. 35,500
PUBLISHING -- 0.4%
1,000 Gannett Co., Inc. 67,250
500 Knight-Ridder, Inc. 34,063
----------
101,313
RAILROADS -- 0.4%
500 Burlington Northern Santa Fe Corp. 41,062
500 CSX Corp. 22,813
500 Norfolk Southern Corp. 42,500
----------
106,375
RECREATION -- 2.1%
9,049 Walt Disney Co. 578,005
500 Time Warner Inc. 20,437
----------
598,442
RESTAURANTS -- 2.1%
12,500 McDonald's Corp. 600,000
RETAIL - SPECIALTY -- 0.8%
3,000 Best Buy Co., Inc.*<F1> 52,125
1,500 NIKE, Inc. Cl B 121,875
1,000 Toys 'R' Us, Inc.*<F1> 27,000
1,000 Walgreen Co. 32,625
-----------
233,625
RETAIL STORES -- 1.1%
500 Dayton Hudson Corp. 42,437
2,500 Gap, Inc. 138,438
500 The May Department Stores Co. 24,125
500 Nordstrom, Inc. 24,219
3,000 Wal-Mart Stores, Inc. 69,375
----------
298,594
SEMICONDUCTORS -- 6.2%
3,500 Altera Corp.*<F1> 195,563
5,000 Atmel Corp.*<F1> 127,500
18,000 Intel Corp. 1,023,750
3,000 LSI Logic Corp.*<F1> 80,250
5,000 Texas Instruments Inc. 254,375
2,000 Xilinx, Inc.*<F1> 63,500
----------
1,744,938
SEMICONDUCTOR/CAPITAL SPENDING -- 0.9%
4,500 Applied Materials, Inc.*<F1> 156,938
2,000 KLA Instruments Corp.*<F1> 45,250
1,000 Novellus Systems, Inc.*<F1> 44,500
----------
246,688
TELECOMMUNICATIONS -- 5.1%
2,500 America Online Inc.*<F1> 140,000
5,000 L.M. Ericsson Telephone Co. ADR 106,875
11,500 Motorola, Inc. 609,500
12,000 Tellabs, Inc.*<F1> 580,500
-----------
1,436,875
TRANSPORTATION -- 0.2%
500 Boeing Co. 43,312
-----------
Total common stocks
(cost $15,924,462) 28,122,964
SHORT-TERM INVESTMENTS -- 0.4% (A)<F2>
VARIABLE RATE DEMAND NOTES
$60,000 American Family Financial Services 60,000
57,896 Pitney Bowes Credit Corp. 57,896
10,000 Wisconsin Electric Power Company 10,000
----------
Total short-term investments
(cost $127,896) 127,896
----------
Total investments
(cost $16,052,358) 28,250,860
Liabilities, less cash and
receivables -- (0.0%) (A)<F2> (11,054)
-----------
NET ASSETS $28,239,806
-----------
-----------
Net Asset Value Per Share ($0.01
par value, 20,000,000 shares
authorized), offering and
redemption price ($28,239,806 /
1,422,705 shares outstanding) $19.85
----------
----------
*<F1> Non-income producing security.
(a)<F2>Percentages for the various classifications relate to net assets.
The accompanying notes to financial statements are an integral part of this
statement.
Reynolds Blue Chip Growth Fund
STATEMENT OF OPERATIONS
For the Six Months Ended March 31, 1996 (Unaudited)
INCOME:
Dividends $179,701
Interest 15,565
---------
Total income 195,266
---------
EXPENSES:
Management fee 153,583
Administrative services 30,183
Transfer agent fees 13,509
Custodian fees 7,500
Professional fees 10,230
Registration fees 3,739
Printing and postage expense 5,804
Other expenses 4,968
---------
Total expenses 229,516
---------
NET INVESTMENT LOSS (34,250)
---------
NET REALIZED GAIN ON INVESTMENTS 278,374
NET INCREASE IN UNREALIZED APPRECIATION ON INVESTMENTS 642,684
---------
NET GAIN ON INVESTMENTS 921,058
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $886,808
---------
---------
The accompanying notes to financial statements are an integral part of this
statement.
Reynolds Blue Chip Growth Fund
STATEMENTS OF CHANGES IN NET ASSETS
For the Six Months Ended March 31, 1996 (Unaudited) and For the Year Ended
September 30, 1995
1996 1995
-------- -------
OPERATIONS:
Net investment (loss) income $(34,250) $35,153
Net realized gain on investments 278,374 47,749
Net increase in unrealized appreciation
on investments 642,684 7,502,425
---------- ---------
Net increase in net assets resulting
from operations 886,808 7,585,327
---------- ---------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income
($0.0185 and $0.0633 per share, respectively) (28,543) (106,402)
Distributions from net realized gains
($0.0270 and $0.1705 per share, respectively) (43,289) (284,893)
---------- ----------
Total distributions (71,832) (391,295)*<F3>
---------- ----------
FUND SHARE ACTIVITIES:
Proceeds from shares issued (398,215 and
243,750 shares, respectively) 7,811,385 4,363,154
Net asset value of shares issued in distributions
(3,629 and 26,950 shares, respectively) 69,921 388,744
Cost of shares redeemed (504,264 and 458,419
shares, respectively) (9,813,245) (7,360,639)
---------- ----------
Net decrease in net assets derived from
Fund share activities (1,931,939) (2,608,741)
----------- ----------
TOTAL (DECREASE) INCREASE (1,116,963) 4,585,291
NET ASSETS AT THE BEGINNING OF THE PERIOD 29,356,769 24,771,478
----------- ----------
NET ASSETS AT THE END OF THE PERIOD
(including undistributed net investment
income of $0 and $28,529, respectively) $28,239,806 $29,356,769
----------- ----------
----------- ----------
*<F3>Total distributions include $112,931 of ordinary income, of which 100% is
eligible for the corporate dividends received deduction.
The accompanying notes to financial statements are an integral part of this
statement.
Reynolds Blue Chip Growth Fund
FINANCIAL HIGHLIGHTS
(Selected Data for each share of the Fund outstanding throughout each period)
<TABLE>
<CAPTION>
(UNAUDITED)
FOR THE SIX MONTHS
ENDED MARCH 31, YEARS ENDED SEPTEMBER 30,
-------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988*<F4>
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $19.25 $14.46 $14.22 $14.98 $13.96 $11.14 $11.92 $10.06 $10.00
Income from investment operations:
Net investment (loss) income (0.02) 0.02 0.09 0.12 0.09 0.14 0.07 0.25 0.03
Net realized and unrealized
gain (loss) on investments 0.67 5.00 0.28 (0.79) 1.02 2.83 (0.65) 1.73 0.03
------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment operations 0.65 5.02 0.37 (0.67) 1.11 2.97 (0.58) 1.98 0.06
Less distributions:
Dividends from net investment
income (0.02) (0.06) (0.13) (0.09) (0.09) (0.15) (0.15) (0.12) --
Distributions from net realized gains (0.03) (0.17) -- -- -- -- (0.05) -- --
------ ------ ------ ------ ------ ------ ------ ------ ------
Total from distributions (0.05) (0.23) (0.13) (0.09) (0.09) (0.15) (0.20) (0.12) --
------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of period $19.85 $19.25 $14.46 $14.22 $14.98 $13.96 $11.14 $11.92 $10.06
------ ------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL INVESTMENT RETURN 6.8%**<F5>35.3% 2.6% (4.5%) 8.0% 26.9% (5.0%) 19.9% 4.6%**<F5>
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's $) 28,240 29,357 24,771 38,929 40,580 27,735 10,009 5,260 366
Ratio of expenses (after reimbursement)
to average net assets***<F6> 1.5%**<F5>1.5% 1.5% 1.4% 1.5% 1.7% 2.1% 2.0% 2.0%**<F5>
Ratio of net investment (loss) income
to average net assets****<F7> (0.2%)**<F5>0.1% 0.5% 0.8% 0.6% 1.2% 0.8% 2.7% 4.5%**<F5>
Portfolio turnover rate 17.8% 49.2% 43.3% 38.1% 0.2% 0.9% 66.2% 32.5% --
*<F4>For the period from August 10, 1988 (commencement of operations) to
September 30, 1988.
**<F5>Annualized.
***<F6>Computed after giving effect to adviser's expense limitation undertaking.
If the Fund had paid all of its expenses, the ratio would have been 2.7% for the
year ended September 30, 1989.
****<F7>If the Fund had paid all of its expenses, the ratio would have been 2.0%
for the year ended September 30, 1989.
The accompanying notes to financial statements are an integral part of this
statement.
</TABLE>
Reynolds Opportunity Fund
STATEMENT OF NET ASSETS
March 31, 1996 (Unaudited)
QUOTED
SHARES MARKET VALUE
------ ------------
LONG-TERM INVESTMENTS -- 99.3% (A)<F9>
COMMON STOCKS -- 99.1% (A)<F9>
APPAREL -- 0.4%
400 St. John Knits, Inc. $26,950
500 Tommy Hilfiger Corp.*<F8> 22,937
----------
49,887
BEVERAGES -- 1.5%
500 The Coca-Cola Company 41,312
1,400 Cott Corp. 8,925
300 Grupo Embotellador de Mexico,
S.A. de C.V. GDR*<F8> 2,588
500 Panamerican Beverages Inc. 20,187
2,000 PepsiCo, Inc. 126,500
---------
199,512
BIOTECHNOLOGY -- 2.0%
800 Amgen Inc.*<F8> 46,500
1,000 Biogen, Inc.*<F8> 59,500
2,000 Bio-Vascular, Inc.*<F8> 21,250
700 Centocor, Inc.*<F8> 25,287
500 Cephalon Inc.*<F8> 12,937
309 Chiron Corp.*<F8> 30,359
500 Gensia Inc.*<F8> 2,313
54 Genzyme Tissue Repair*<F8> 884
400 Genzyme Corp.*<F8> 22,000
400 Human Genome Sciences, Inc.*<F8> 15,400
500 Immunex Corp.*<F8> 8,063
300 Quintiles Transnational, Corp.*<F8> 19,500
500 Somatogen, Inc.*<F8> 8,813
----------
272,806
BUILDING -- 0.5%
800 Fastenal Co. 30,800
866 The Home Depot, Inc. 41,460
---------
72,260
CABLE TV/BROADCASTING -- 1.3%
500 ANTEC Corp.*<F8> 7,750
600 C-COR Electronics, Inc.*<F8> 9,300
500 Cablevision Systems Corp.*<F8> 28,750
600 Clear Channel Communications, Inc.*<F8> 33,900
300 General Instrument Corp.*<F8> 8,100
300 Grupo Televisa, S.A. GDR*<F8> 7,462
600 Infinity Broadcasting Corp.*<F8> 26,025
250 LIN Television Corp.*<F8> 8,813
300 Viacom Inc.*<F8> 12,300
628 Viacom Inc. Ser. B*<F8> 26,454
----------
168,854
CELLULAR -- 0.5%
300 AirTouch Communications*<F8> 9,338
500 BRIGHTPOINT INC.*<F8> 9,125
400 Grupo Iusacell, S.A. de C.V. ADR Ser L*<F8> 4,350
300 Nokia Corp. "A" ADR 10,275
800 Paging Network, Inc.*<F8> 20,000
450 Vanguard Cellular Systems, Inc.*<F8> 9,000
----------
62,088
CHEMICALS - SPECIALTY -- 1.4%
500 Alcide Corp.*<F8> 10,625
300 Desc, S.A. de C.V. ADR*<F8> 5,100
1,000 Dionex Corp.*<F8> 35,375
500 Exide Corp. 11,688
600 Ionics, Inc.*<F8> 25,050
600 Millipore Corp. 22,950
300 Raychem Corp. 19,350
600 Sealed Air Corp.*<F8> 20,475
300 Sigma-Aldrich Corp. 17,175
125 Tetra Tech, Inc.*<F8> 2,781
400 Witco Corp. 14,100
----------
184,669
COMPUTER NETWORKING -- 9.7%
5,895 3Com Corp.*<F8> 235,063
2,900 Ascend Communications, Inc.*<F8> 156,237
5,260 Bay Networks, Inc.*<F8> 161,745
1,250 Cabletron Systems, Inc.*<F8> 82,813
1,200 Cascade Communications Corp.*<F8> 107,700
7,400 Cisco Systems Inc.*<F8> 343,175
700 Computer Telephone Corp.*<F8> 7,788
1,000 CrossComm Corp.*<F8> 10,250
400 Digi International Inc.*<F8> 11,000
500 Firefox Communications Inc.*<F8> 5,750
900 FORE Systems, Inc.*<F8> 64,350
793 MADGE NETWORKS N.V.*<F8>
(formerly Madge, N.V.) 31,819
300 Network General Corp.*<F8> 12,000
800 Optical Data Systems, Inc.*<F8> 16,400
1,200 StrataCom, Inc.*<F8> 43,950
----------
1,290,040
COMPUTER & PERIPHERALS -- 4.0%
600 Brooktrout Technology, Inc.*<F8> 20,700
500 Compaq Computer Corp.*<F8> 19,313
400 Cyrix Corp.*<F8> 9,550
600 Dell Computer Corp.*<F8> 20,100
400 Exabyte Corp.*<F8> 6,525
500 FileNet Corp.*<F8> 28,875
400 Franklin Electronic Publishers Inc.*<F8> 9,850
400 Gateway 2000, Inc.*<F8> 11,150
1,000 Hewlett-Packard Co. 94,000
1,000 International Business Machines Corp. 111,125
1,200 Iomega Corp. 30,750
600 MicroTouch Systems, Inc.*<F8> 9,150
600 Oak Technology, Inc.*<F8> 12,900
500 Read-Rite Corp.*<F8> 9,375
500 Seagate Technology, Inc.*<F8> 27,375
300 Shiva Corp.*<F8> 27,225
1,000 Silicon Graphics, Inc.*<F8> 25,000
700 Solectron Corp.*<F8> 30,800
600 Sun Microsystems, Inc.*<F8> 26,250
400 SyQuest Technology, Inc.*<F8> 2,375
----------
532,388
COMPUTER SOFTWARE & SERVICES -- 14.1%
800 Adaptec, Inc.*<F8> 38,600
1,260 Adobe Systems Inc. 40,635
900 American Management Systems, Inc.*<F8> 22,950
500 Aspen Technology, Inc.*<F8> 21,500
500 Astea International Inc.*<F8> 14,750
300 Atria Software, Inc.*<F8> 16,425
1,000 Autodesk, Inc. 37,750
450 AVANT! CORP.*<F8> 10,800
300 Baan Company N.V.*<F8> 17,287
1,000 BMC Software, Inc.*<F8> 54,750
400 Broderbund Software, Inc.*<F8> 15,100
750 Cadence Design Systems, Inc.*<F8> 33,094
300 Cheyenne Software, Inc.*<F8> 4,725
750 Computer Associates International, Inc. 53,719
600 Computer Horizon Corp.*<F8> 22,650
300 Compuware Corp.*<F8> 6,900
600 Comshare, Inc.*<F8> 13,800
800 Davidson & Associates, Inc.*<F8> 18,700
600 Electronics for Imaging, Inc.*<F8> 26,100
400 EMC Corp. (Mass.)*<F8> 8,750
400 FIserv, Inc.*<F8> 11,200
400 FTP Software, Inc.*<F8> 4,900
500 Gupta Corp.*<F8> 2,781
400 Hummingbird Communications Ltd.*<F8> 15,100
600 Hyperion Software Corporation*<F8> 13,050
4,000 Informix Corp.*<F8> 105,500
600 INSO Corp.*<F8> 27,675
300 Integrated Systems, Inc.*<F8> 14,475
600 Macromedia, Inc.*<F8> 25,650
300 MapInfo Corp.*<F8> 3,600
450 McAffee Associates, Inc.*<F8> 24,637
400 Merix Corp.*<F8> 14,800
4,900 Microsoft Corp.*<F8> 505,313
1,000 NetManage, Inc.*<F8> 10,875
4,500 Oracle Corp.*<F8> 212,063
2,000 Parametric Technology Corp.*<F8> 78,250
1,600 PeopleSoft, Inc.*<F8> 92,000
500 PHAMIS, Inc.*<F8> 8,375
1,000 Policy Management Systems Corp.*<F8> 45,000
500 Softdesk, Inc.*<F8> 6,750
400 Softkey International Inc.*<F8> 8,050
1,000 SunGard Data Systems Inc.*<F8> 34,250
2,800 Sybase, Inc.*<F8> 65,100
400 Symantec Corp.*<F8> 5,150
1,000 Synopsys, Inc.*<F8> 32,000
450 System Software Associates, Inc. 11,475
400 Systems & Computer Technology Corp.*<F8> 5,900
400 Trident Microsystems, Inc.*<F8> 5,750
300 Wall Data Inc.*<F8> 4,650
400 Wonderware Corp.*<F8> 9,400
----------
1,882,704
DRUGS -- 4.4%
300 Agouron Pharmaceuticals, Inc.*<F8> 11,625
500 ALZA Corp.*<F8> 15,375
300 Elan Corp. plc*<F8> 19,275
400 Interneuron Pharmaceuticals, Inc.*<F8> 14,850
600 Jones Medical Industries, Inc. 23,100
1,000 Eli Lilly & Co. 65,000
3,022 Merck & Co., Inc. 188,119
300 PDT, Inc.*<F8> 17,700
500 Perrigo Co.*<F8> 6,750
2,000 Pfizer Inc. 134,000
1,500 Schering-Plough Corp. 87,188
----------
582,982
ELECTRONICS -- 1.2%
675 Analog Devices, Inc.*<F8> 18,900
300 Arrow Electronics, Inc.*<F8> 14,100
300 Avnet, Inc. 14,475
300 Credence Systems Corp.*<F8> 5,025
800 International Rectifier Corp.*<F8> 14,400
400 Logicon, Inc. 12,750
400 Marshall Industries*<F8> 12,200
468 Molex Inc. 16,321
300 Philips Electronics N.V. ADR 10,912
900 Pioneer-Standard Electronics, Inc. 13,838
400 SCI Systems, Inc.*<F8> 14,650
400 Spectrian Corp.*<F8> 8,900
454 Teradyne, Inc.*<F8> 7,605
---------
164,076
ENERGY -- 1.2%
400 Baker Hughes Inc. 11,700
500 Dresser Industries, Inc. 15,250
1,600 Input/Output, Inc.*<F8> 49,600
800 Noble Affiliates, Inc. 26,000
500 Seitel, Inc.*<F8> 13,562
500 Smith International, Inc.*<F8> 12,625
300 Sonat Offshore Drilling Inc. 15,300
400 Tidewater Inc. 15,200
----------
159,237
ENGINEERING & CONSTRUCTION -- 0.0%
300 Bufete Industrial, S.A. ADR*<F8> 4,987
300 Grupo Tribasa, S.A. de C.V. ADR*<F8> 2,063
----------
7,050
ENVIRONMENTAL -- 0.2%
400 Sanifill, Inc.*<F8> 15,350
500 USA Waste Services, Inc.*<F8> 12,750
----------
28,100
FINANCIAL SERVICES -- 3.8%
500 American Express Co. 24,687
700 Atalanta/Sosnoff Capital Corp. 7,000
400 BISYS Group, Inc.*<F8> 13,250
400 Ceridian Corp.*<F8> 17,200
600 Equifax Inc. 12,075
600 Fair, Isaac and Co., Inc. 18,000
975 First Data Corp. 68,738
400 First USA, Inc. 22,650
300 Franklin Resources, Inc. 17,100
800 Green Tree Financial Corp. 27,500
800 Intuit Inc.*<F8> 36,000
600 Medaphis Corp.*<F> 29,100
750 The Money Store, Inc. 20,906
750 Paychex, Inc. 43,875
500 PMT Services, Inc.*<F8> 12,000
300 T. Rowe Price Associates, Inc. 15,900
400 Primark Corp.*<F8> 14,800
2,250 Charles Schwab Corp. 57,656
300 Shared Medical Systems Corp. 18,075
300 SunAmerica, Inc. 15,113
500 VeriFone, Inc.*<F8> 21,000
----------
512,625
FOODS -- 0.5%
300 Hershey Foods Corp. 22,350
500 Philip Morris Companies Inc. 43,875
---------
66,225
HEALTH MAINTENANCE ORGANIZATIONS -- 4.7%
300 Coventry Corp.*<F8> 5,137
400 Foundation Health Corp.*<F8> 15,250
600 Healthsource, Inc.*<F8> 23,250
300 Healthwise of America, Inc.*<F8> 11,925
3,000 Oxford Health Plans, Inc.*<F8> 263,250
700 PacifiCare Health Systems, Inc.*<F8> 57,400
500 Physician Corp. of America*<F8> 8,000
400 Sierra Health Services, Inc.*<F8> 13,050
2,500 United HealthCare Corp.*<F8> 153,750
300 United Wisconsin Services, Inc. 6,488
500 United American Healthcare Corp.*<F8> 6,750
1,350 U.S. Healthcare, Inc. 61,931
----------
626,181
HOTELS -- 0.2%
600 HFS Incorporated*<F8> 29,175
HOUSEHOLD PRODUCTS -- 1.2%
500 American Home Products Corp. 54,188
300 Estee Lauder Companies Inc. 10,725
500 Paragon Trade Brands, Inc.*<F8> 10,375
1,000 Procter & Gamble Co. 84,750
----------
160,038
MACHINERY -- 0.3%
750 IDEX Corp. 29,156
500 Integrated Process Equipment Corp.*<F8> 8,750
----------
37,906
MEDICAL SERVICES -- 4.8%
600 Apria Healthcare Group Inc.*<F8> 19,050
300 Cardinal Health, Inc. 19,275
600 Cerner Corp.*<F8> 13,950
1,344 Columbia/HCA Healthcare Corp. 77,616
1,000 Coram Healthcare Corp.*<F8> 5,625
300 Express Scripts, Inc.*<F8> 14,025
400 Genesis Health Ventures, Inc.*<F8> 16,150
400 Grupo Casa Autrey, S.A. de C.V. ADR*<F8> 7,400
800 Gulf South Medical Supply, Inc.*<F8> 30,200
300 HBO & Co. 28,275
400 Health Care & Retirement Corp.*<F8> 15,100
1,125 Health Management Associates, Inc.*<F8> 39,375
900 Health Management Systems, Inc.*<F8> 25,425
500 HealthCare COMPARE Corp.*<F8> 25,187
1,786 HEALTHSOUTH Corp.*<F8> 60,724
500 Horizon/CMS Healthcare Corporation*<F8> 7,000
400 Integrated Health Services, Inc. 9,350
400 Living Centers of America, Inc.*<F8> 14,900
400 Manor Care, Inc. 15,700
500 OrNda HealthCorp*<F8> 14,375
900 PhyCor, Inc.*<F8> 39,600
300 Physician Reliance Network, Inc.*<F8> 11,888
900 Physician Sales & Service, Inc.*<F8> 22,275
600 Renal Treatment Centers, Inc.*<F8> 14,250
600 Target Therapeutics, Inc.*<F8> 36,375
400 Universal Health Services, Inc. CL B*<F8> 21,250
549 Value Health, Inc.*<F8> 15,098
500 Vencor Inc.*<F8> 17,250
----------
636,688
MEDICAL SUPPLIES -- 4.3%
500 Abbott Laboratories 20,375
400 Arrow International, Inc. 16,650
2,207 Boston Scientific Corp.*<F8> 101,522
400 Empi, Inc.*<F8> 7,350
400 Guidant Corp. 21,650
600 IDEXX Laboratories, Inc.*<F8> 25,200
1,838 Johnson & Johnson 169,556
400 Lunar Corp.*<F8> 17,100
1,600 Medtronic, Inc. 95,400
400 Nellcor Puritan Bennett Inc.*<F8>
(formerly Nellcor Inc.) 25,700
500 Pyxis Corp.*<F8> 12,844
500 Sofamor/Danek Group, Inc.*<F8> 16,937
450 St. Jude Medical, Inc.*<F8> 16,791
300 Stryker Corp. 14,756
500 Ventritex, Inc.*<F8> 7,688
----------
569,519
OFFICE EQUIPMENT & SUPPLIES -- 2.3%
300 Boise Cascade Office Products Corp.*<F8> 19,612
500 CompUSA Inc.*<F8> 27,687
500 Corporate Express, Inc.*<F8> 16,500
500 Danka Business Systems PLC 21,125
500 Merisel, Inc.*<F8> 1,219
400 Micro Warehouse, Inc.*<F8> 16,600
3,000 Office Depot, Inc.*<F8> 58,875
450 OfficeMax, Inc.*<F8> 10,913
5,062 Staples, Inc.*<F8> 103,138
500 Viking Office Products, Inc.*<F8> 27,813
----------
303,482
PUBLISHING -- 0.1%
300 Scholastic Corp.*<F8> 20,625
RECREATION -- 1.6%
400 Autotote Corp.*<F8> 1,250
1,000 Callaway Golf Co. 26,750
400 Discovery Zone, Inc.*<F8> 350
1,000 Walt Disney Co. 63,875
700 Electronic Arts*<F8> 18,550
500 International Game Technology 6,812
500 Mirage Resorts, Inc.*<F8> 21,937
40 NATIONAL LODGING CORP*<F8>
(formerly National Gaming Corp.) 560
500 PLATINUM technology, inc.*<F8> 7,563
400 PolyGram N.V. 24,100
900 Regal Cinemas, Inc.*<F8> 33,300
300 Sierra On-Line, Inc.*<F8> 10,088
---------
215,135
RESTAURANTS -- 1.4%
500 Applebee's International Inc. 12,500
500 Boston Chicken, Inc.*<F8> 17,031
1,500 Checkers Drive-In Restaurants, Inc.*<F8> 1,922
500 Cracker Barrel Old Country Store, Inc. 11,625
400 Fresh Choice, Inc.*<F8> 2,650
500 Lone Star Steakhouse & Saloon, Inc.*<F8> 19,125
500 Longhorn Steaks, Inc.*<F8> 11,500
500 McDonald's Corp. 24,000
1,500 Outback Steakhouse, Inc.*<F8> 56,532
600 Papa John's International, Inc.*<F8> 26,775
1,000 Rally's Hamburgers Inc.*<F8> 2,000
----------
185,660
RETAIL - SPECIALTY -- 6.2%
600 AnnTaylor Stores Corp.*<F8> 10,800
1,000 Autozone, Inc.*<F8> 33,875
300 Baby Superstore, Inc.*<F8> 13,650
300 Barnes & Noble Inc.*<F8> 10,425
400 Bed Bath & Beyond Inc.*<F8> 21,100
1,000 Best Buy Co., Inc.*<F8> 17,375
1,125 Bombay Co., Inc.*<F8> 9,141
500 Books-A-Million, Inc.*<F8> 5,500
500 Borders Group, Inc.*<F8> 14,250
500 Casey's General Stores, Inc. 11,750
1,050 CUC International Inc.*<F8> 30,712
500 Damark International, Inc.*<F8> 4,750
300 Department 56, Inc.*<F8> 6,562
400 Designs, Inc.*<F8> 2,800
375 Dollar General Corp. 10,875
400 Eckerd Corp.*<F8> 19,250
400 Fila Holding S. p. A.*<F8> 25,550
800 General Nutrition Companies, Inc.*<F8> 20,000
300 Gucci Group, N.V.*<F8> 14,400
500 Gymboree Corp.*<F8> 13,062
600 Hollywood Entertainment Corp.*<F8> 7,950
675 Just For Feet, Inc.*<F8> 28,097
1,000 Kenneth Cole Productions Inc.*<F8> 17,875
300 Kohl's Corp.*<F8> 19,012
300 Luxottica Group ADR*<F8> 23,438
600 The Men's Wearhouse Inc.*<F8> 18,900
400 Nautica Enterprises Inc.*<F8> 19,100
500 NBTY Inc.*<F8> 3,813
1,000 NIKE, Inc. Cl B 81,250
400 Nine West Group Inc.*<F8> 17,300
300 Oakley Inc.*<F8> 11,325
400 Pep Boys-Manny, Moe & Jack 13,400
750 PETsMART, Inc.*<F8> 27,188
1,050 Pier 1 Imports, Inc. 13,256
500 Proffitt's Inc.*<F8> 15,750
500 Rhodes, Inc.*<F8> 4,750
2,000 Starbucks Corp.*<F8> 46,626
300 Sterling Software, Inc.*<F8> 21,150
2,000 Sunglass Hut International, Inc.*<F8> 66,250
900 Talbots, Inc. 34,200
1,000 Toys 'R' Us, Inc.*<F8> 27,000
500 Williams-Sonoma, Inc.*<F8> 11,375
500 Woolworth Corp.*<F8> 7,813
---------
832,645
RETAIL STORES -- 0.5%
500 Dillard Department Stores, Inc. 17,312
500 Gap, Inc. 27,688
1,000 Wal-Mart Stores, Inc. 23,125
---------
68,125
SEMICONDUCTORS -- 9.6%
450 Alliance Semiconductor Corp.*<F8> 4,331
1,800 Altera Corp.*<F8> 100,575
400 ALTRON INC.*<F8> 11,650
2,200 Atmel Corp.*<F8> 56,100
600 Cirrus Logic, Inc.*<F8> 10,838
800 Cree Research, Inc.*<F8> 12,200
400 EPIC Design Technology, Inc.*<F8> 12,225
300 Exar Corp.*<F8> 4,425
500 Hadco Corp.*<F8> 15,250
1,000 Integrated Device Technology, Inc.*<F8> 11,375
300 Integrated Silicon Solution, Inc.*<F8> 3,975
6,800 Intel Corp. 386,750
1,500 Lattice Semiconductor Corp.*<F8> 42,562
500 Level One Communications Inc.*<F8> 13,875
600 Linear Technology Corp. 25,050
6,000 LSI Logic Corp.*<F8> 160,500
400 Micrel, Inc.*<F8> 5,700
850 Microchip Technology Inc.*<F8> 23,375
3,500 Micron Technology, Inc. 109,813
500 National Semiconductor Corp.*<F8> 6,938
400 OPTi Inc.*<F8> 2,300
600 Park Electrochemical Corp. 17,850
300 SGS-THOMSON Microelectronics N.V.*<F8> 10,875
1,000 Sierra Semiconductor Corp.*<F8> 19,000
2,000 Texas Instruments Inc. 101,750
3,000 Xilinx, Inc.*<F8> 95,250
300 Zilog, Inc.*<F8> 10,125
----------
1,274,657
SEMICONDUCTOR CAPITAL SPENDING -- 2.4%
3,000 Applied Materials, Inc.*<F8> 104,625
300 Asyst Technologies, Inc.*<F8> 6,825
600 Electroglas, Inc.*<F8> 9,225
600 FSI International, Inc.*<F8> 6,975
600 GaSonics International Corp.*<F8> 5,550
1,800 KLA Instruments Corp.*<F8> 40,725
600 Kulicke & Soffa Industries, Inc.*<F8> 9,450
1,000 Lam Research Corp.*<F8> 35,000
600 Mattson Technology, Inc.*<F8> 7,800
300 Novellus Systems, Inc.*<F8> 13,350
600 Photronics, Inc.*<F8> 12,788
800 Sanmina Corp.*<F8> 23,800
450 Semitool Inc.*<F8> 6,750
400 Silicon Valley Group, Inc.*<F8> 9,750
800 Tencor Instruments 14,400
600 Ultratech Stepper, Inc.*<F8> 10,575
---------
317,588
SERVICES -- 3.2%
1,200 AccuStaff Inc.*<F8> 30,300
600 Acxiom Corp.*<F8> 14,325
400 Airborne Freight Corp. 10,100
300 BBN Corporation*<F8> 7,612
300 Cambridge Technology Partners
(Mass) Inc.*<F8> 17,137
1,000 Checkpoint Systems, Inc.*<F8> 24,875
600 Corrections Corp. of America*<F8> 34,200
400 CRA Managed Care, Inc.*<F8> 14,300
300 Eltron International, Inc.*<F8> 9,900
500 Employee Solutions, Inc.*<F8> 18,500
500 Fritz Companies, Inc.*<F8> 19,500
800 Gartner Group, Inc.*<F8> 48,800
505 Information Resources, Inc.*<F8> 7,323
400 Manpower Inc. 12,400
400 MICROS Systems, Inc.*<F8> 10,000
450 Olsten Corp. 14,513
700 Personnel Group of America, Inc.*<F8> 12,775
800 Robert Half International Inc.*<F8> 38,900
400 Sensormatic Electronics Corp. 8,100
400 Structural Dynamics Research Corp.*<F8> 13,500
400 Sylvan Learning Systems, Inc.*<F8> 14,300
400 Symbol Technologies, Inc.*<F8> 14,050
300 Wackenhut Corrections Corp.*<F8> 11,700
600 Zebra Technologies Corp.*<F8> 15,900
----------
423,010
TECHNOLOGY -- 1.3%
300 Burr-Brown Corp.*<F8> 4,725
600 Cognex Corp.*<F8> 15,375
400 Fusion Systems Corp.*<F8> 10,100
500 In Focus Systems, Inc.*<F8> 17,531
600 Kent Electronics Corp.*<F8> 21,225
450 Kronos Inc.*<F8> 11,475
800 Maxim Integrated Products Inc.*<F8> 24,800
300 Pacific Scientific Co. 6,338
300 Proxima Corp.*<F8> 5,738
1,000 S3 Incorporated*<F8> 11,938
300 Thermo Electron Corp. 17,850
300 Three-Five Systems, Inc.*<F8> 3,525
420 Vishay Intertechnology, Inc.*<F8> 11,340
300 Watkins-Johnson Co. 10,725
----------
172,685
TELECOMMUNICATIONS -- 8.3%
300 ADC Telecommunications, Inc.*<F8> 10,350
600 ADTRAN, Inc.*<F8> 27,450
800 America Online Inc.*<F8> 44,800
1,125 Andrew Corp.*<F8> 43,031
600 Aspect Telecommunications Corp.*<F8> 27,450
400 Boston Technology, Inc.*<F8> 5,300
1,300 C-Cube Microsystems, Inc.*<F8> 68,250
400 CIDCO, Inc.*<F8> 12,900
400 CMG Information Services, Inc.*<F8> 15,800
300 Cognos Inc.*<F8> 17,025
600 Coherent Communication
Systems Corp.*<F8> 12,460
500 Dialogic Corp.*<F8> 21,125
400 Digital Link Corp.*<F8> 4,400
1,000 DSC Communications Corp.*<F8> 27,000
800 L.M. Ericsson Telephone Co. ADR 17,100
1,350 Glenayre Technologies, Inc.*<F8> 51,637
1,000 Global Village Communication, Inc.*<F8> 14,875
300 Globalstar Telecommunications Ltd.*<F8> 15,900
300 MFS Communications Co., Inc.*<F8> 18,675
1,000 Motorola, Inc. 53,000
300 NETCOM On-Line Communication
Services, Inc.*<F8> 7,200
600 Netscape Communications Corp.*<F8> 24,900
500 Network Equipment Technologies, Inc.*<F8> 15,187
1,251 NEXTEL Communications, Inc.*<F8> 23,613
400 Octel Communications Corp.*<F8> 19,300
300 PairGain Technologies, Inc.*<F8> 19,425
2,000 PictureTel Corp.*<F8> 62,000
400 Plantronics, Inc.*<F8> 15,100
300 Premisys Communications, Inc.*<F8> 9,750
500 PSINET INC.*<F8> 4,844
500 QUALCOMM Inc.*<F8> 20,750
500 Quarterdeck Corp.*<F8> 7,375
500 Reuters Holdings PLC ADR 32,562
400 Spyglass, Inc.*<F8> 8,650
600 Tekelec*<F8> 7,425
3,000 Tellabs, Inc.*<F8> 145,125
500 Trimble Navigation Ltd.*<F8> 11,438
800 U.S. Robotics Corp.*<F8> 103,400
300 UUNET Technologies, Inc.*<F8> 7,650
1,238 WorldCom Inc.*<F8> 56,948
----------
1,111,170
----------
Total common stocks
(cost $9,370,573) 13,219,792
PREFERRED STOCKS -- 0.2%
800 FHP International Corp., 5%, Series A $22,400
----------
Total preferred stocks
(cost $14,135) 22,400
----------
Total long-term investments
(cost $9,384,708) 13,242,192
SHORT-TERM INVESTMENTS -- 0.9% (A)<F9>
VARIABLE RATE DEMAND NOTES
$55,000 American Family Financial Services 55,000
19,778 Pitney Bowes Credit Corp. 19,778
39,000 Wisconsin Electric Power Company 39,000
----------
Total short-term investments
(cost $113,778) 113,778
----------
Total investments
(cost $9,498,486) 13,355,970
Liabilities, less cash and
receivables -- (0.2%) (A)<F9> (23,363)
----------
NET ASSETS $13,332,607
-----------
-----------
Net Asset Value Per Share ($0.01
par value, 20,000,000 shares
authorized), offering and
redemption price ($13,332,607 /
928,231 shares outstanding) $14.36
----------
----------
* <F8>Non-income producing security.
(a)<F9>Percentages for the various classifications relate to net assets.
The accompanying notes to financial statements are an integral part of this
statement.
Reynolds Opportunity Fund
STATEMENT OF OPERATIONS
For the Six Months Ended March 31, 1996 (Unaudited)
INCOME:
Dividends $18,134
Interest 4,497
--------
Total income 22,631
--------
EXPENSES:
Management fees 59,409
Administrative services 11,882
Professional fees 9,623
Transfer agent fees 4,573
Registration fees 4,499
Printing and postage expense 3,344
Custodian fees 2,712
Amortization of organizational expenses 1,378
Other expenses 1,321
--------
Total expenses 98,741
--------
NET INVESTMENT LOSS (76,110)
--------
NET REALIZED GAIN ON INVESTMENTS 62,672
NET INCREASE IN UNREALIZED APPRECIATION ON INVESTMENTS 192,392
--------
NET GAIN ON INVESTMENTS 255,064
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $178,954
--------
--------
STATEMENTS OF CHANGES IN NET ASSETS
For the Six Months Ended March 31, 1996 (Unaudited) and For the Year Ended
September 30, 1995
1996 1995
--------- --------
OPERATIONS:
Net investment loss $(76,110) $(117,160)
Net realized gain (loss) on investments 62,672 (125,223)
Net increase in unrealized appreciation
on investments 192,392 3,122,966
---------- ----------
Net increase in net assets resulting
from operations 178,954 2,880,583
---------- ----------
FUND SHARE ACTIVITIES:
Proceeds from shares issued (185,443 and
265,966 shares, respectively) 2,635,093 3,063,971
Cost of shares redeemed (32,462 and 98,163
shares, respectively) (464,257) (1,093,553)
---------- ----------
Net increase in net assets derived from
Fund share activities 2,170,836 1,970,418
---------- ----------
TOTAL INCREASE 2,349,790 4,851,001
NET ASSETS AT THE BEGINNING OF THE PERIOD 10,982,817 6,131,816
---------- ----------
NET ASSETS AT THE END OF THE PERIOD $13,332,607 $10,982,817
---------- ----------
---------- ----------
The accompanying notes to financial statements are an integral part of these
statements.
Reynolds Opportunity Fund
FINANCIAL HIGHLIGHTS
(Selected Data for each share of the Fund outstanding throughout each period)
<TABLE>
<CAPTION>
(UNAUDITED) FOR THE
FOR THE PERIOD FROM
SIX MONTHS ENDED FOR THE YEARS JANUARY 30, 1992*<F10>
MARCH 31, ENDED SEPTEMBER 30, TO SEPTEMBER 30,
------------------------------
1996 1995 1994 1993 1992
------ ------- ------- ------ ------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $14.17 $10.09 $9.78 $8.85 $10.00
Income from investment operations:
Net investment (loss) income (0.03) (0.11) (0.09) (0.10) 0.00
Net realized and unrealized gain (loss) on securities 0.22 4.19 0.40 1.03 (1.15)
------ ------- ------- ------ ------
Total from investment operations 0.19 4.08 0.31 0.93 (1.15)
Less distributions:
Dividend from net investment income -- -- -- 0.00 --
------ ------- ------- ------ ------
Net asset value, end of period $14.36 $14.17 $10.09 $ 9.78 $ 8.85
------ ------- ------- ------ ------
------ ------- ------- ------ ------
TOTAL INVESTMENT RETURN 2.7%**<F11> 40.4% 3.2% 10.5% (16.8%)**<F11>
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's $) 13,333 10,983 6,132 3,834 1,844
Ratio of expenses (after reimbursement)
to average net assets***<F12> 1.7%**<F11> 1.9% 2.0% 2.0% 2.0%**<F11>
Ratio of net investment (loss) income
to average net assets****<F13> (1.3%)**<F11> (1.5%) (1.6%) (1.3%) 0.0%**<F11>
Portfolio turnover rate 4.0% 38.4% 16.8% 67.6% 30.1%
* <F10>Commencement of Operations.
** <F11>Annualized.
***<F12>Computed after giving effect to adviser's limitation undertaking. If
the Fund had paid all of its expenses, the ratio would have been, for the years
ended September 30, 1994 and 1993 and for the period ended September 30, 1992,
2.1%, 2.4% and 3.8%**, respectively.
****<F13>The ratio of net investment income prior to adviser's expense
limitation undertaking to average net assets for the years ended September 30,
1994 and 1993 and for the period ended September 30, 1992 would have been
(1.7%), (1.7%) and (1.8%)**, respectively.
The accompanying notes to financial statements are an integral part of this
statement.
</TABLE>
Reynolds U.S. Government Bond Fund
STATEMENT OF NET ASSETS
March 31, 1996 (Unaudited)
PRINCIPAL QUOTED
AMOUNT MARKET VALUE
- ------- ------------
LONG-TERM INVESTMENTS -- 76.2% (A)<F14>
U.S. TREASURY SECURITIES
$ 300,000 U.S. Treasury Notes,
6.375%, due 06/30/97 $302,672
300,000 U.S. Treasury Notes,
5.500%, due 07/31/97 299,437
200,000 U.S. Treasury Notes,
7.125%, due 10/15/98 205,719
200,000 U.S. Treasury Notes,
6.750%, due 05/31/99 204,313
400,000 U.S. Treasury Notes,
6.375%, due 07/15/99 404,562
400,000 U.S. Treasury Notes,
8.500%, due 11/15/00 438,250
---------
Total long-term investments
(cost $1,856,587) 1,854,953
SHORT-TERM INVESTMENTS -- 22.6% (A)<F14>
U.S. Treasury Securities -- 20.6%
$ 100,000 U.S. Treasury Notes,
6.125%, due 07/31/96 $100,234
200,000 U.S. Treasury Notes,
6.250%, due 08/31/96 200,594
200,000 U.S. Treasury Notes,
6.125%, due 12/31/96 201,063
----------
Total U. S. Treasury Securities
(cost $500,145) 501,891
VARIABLE RATE DEMAND NOTES -- 2.0%
47,410 Wisconsin Electric Power Company 47,410
---------
Total variable rate demand notes
(cost $47,410) 47,410
---------
Total short-term investments
(cost $547,555) 549,301
---------
Total investments
(cost $2,404,142) 2,404,254
Cash and receivables, less
liabilities -- 1.2% (A)<F14> 28,988
----------
NET ASSETS $2,433,242
----------
----------
Net Asset Value Per Share ($0.01
par value, 20,000,000 shares
authorized), offering and
redemption price ($2,433,242 /
247,647 shares outstanding) $9.83
----------
----------
The accompanying notes to financial statements are an integral part of this
statement.
Reynolds U.S. Government Bond Fund
STATEMENT OF OPERATIONS
For the Six Months Ended March 31, 1996 (Unaudited)
INCOME:
Interest $82,908
-------
EXPENSES:
Management fees 9,816
Professional fees 5,573
Transfer agent fees 5,034
Registration fees 3,699
Amortization of organizational expenses 1,378
Administrative services 1,309
Printing and postage expense 997
Custodian fees 426
Other expenses 650
--------
Total expenses before reimbursement 28,882
Less expenses assumed by adviser (17,102)
--------
Net expenses 11,780
--------
NET INVESTMENT INCOME 71,128
--------
NET REALIZED GAIN ON INVESTMENTS 2,922
NET DECREASE IN UNREALIZED APPRECIATION ON INVESTMENTS (6,047)
--------
NET LOSS ON INVESTMENTS (3,125)
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $68,003
--------
--------
STATEMENTS OF CHANGES IN NET ASSETS
For the Six Months Ended March 31, 1996 (Unaudited) and For the Year Ended
September 30, 1995
1996 1995
--------- ---------
OPERATIONS:
Net investment income $71,128 $166,986
Net realized gain (loss) on investments 2,922 (144,952)
Net (decrease) increase in unrealized
appreciation on investments (6,047) 203,951
---------- ---------
Net increase in net assets resulting
from operations 68,003 225,985
---------- ---------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income
($0.2684 and $0.5441 per share, respectively) (71,128) (169,574)
---------- ----------
FUND SHARE ACTIVITIES:
Proceeds from shares issued (3,510 and 14,454
shares, respectively) 34,863 141,920
Net asset value of shares issued in distributions
(6,446 and 16,429 shares, respectively) 64,219 158,139
Cost of shares redeemed (46,458 and 201,217
shares, respectively) (461,336) (1,925,062)
--------- -----------
Net decrease in net assets derived
from Fund share activities (362,254) (1,625,003)
---------- -----------
TOTAL DECREASE (365,379) (1,568,592)
NET ASSETS AT THE BEGINNING OF THE PERIOD 2,798,621 4,367,213
---------- -----------
NET ASSETS AT THE END OF THE PERIOD $2,433,242 $2,798,621
---------- ----------
---------- ----------
The accompanying notes to financial statements are an integral part of these
statements.
Reynolds U.S. Government Bond Fund
FINANCIAL HIGHLIGHTS
(Selected Data for each share of the Fund outstanding throughout each period)
<TABLE>
<CAPTION>
(UNAUDITED) FOR THE
FOR THE PERIOD FROM
SIX MONTHS ENDED FOR THE YEARS JANUARY 30, 1992*<F15>
MARCH 31, ENDED SEPTEMBER 30, TO SEPTEMBER 30,
--------------------------------
1996 1995 1994 1993 1992
------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $9.85 $9.61 $10.76 $10.36 $10.00
Income from investment operations:
Net investment income 0.2671 0.5350 0.5609 0.5498 0.2979
Net realized and unrealized (loss) gain on investments (0.0187) 0.2491 (1.1432) 0.4001 0.3602
-------- ------- -------- ------- -------
Total from investment operations 0.2484 0.7841 (0.5823) 0.9499 0.6581
Less distributions:
Dividends from net investment income (0.2684) (0.5441) (0.5607) (0.5499) (0.2981)
Distribution from net realized gains -- -- (0.0070) -- --
-------- ------- -------- ------- -------
Total from distributions (0.2684) (0.5441) (0.5677) (0.5499) (0.2981)
-------- ------- -------- ------- -------
Net asset value, end of period $9.83 $9.85 $9.61 $10.76 $10.36
-------- ------- -------- ------- -------
-------- ------- -------- ------- -------
TOTAL INVESTMENT RETURN 5.12%**<F16> 8.42% (5.54%) 9.48% 10.20%**<F16>
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's $) 2,433 2,799 4,367 6,376 3,223
Ratio of expenses (after reimbursement)
to average net assets***<F17> 0.90%**<F16> 0.91% 0.86% 0.83% 0.75%**<F16>
Ratio of net investment income
to average net assets****<F18> 5.4%**<F16> 5.6% 5.4% 5.3% 5.0%**<F16>
Portfolio turnover rate 0.0% 0.0% 19.6% 6.3% --
*<F15>Commencement of Operations.
**<F16>Annualized.
***<F17>Computed after giving effect to adviser's expense limitation
undertaking. If the Fund had paid all of its expenses, the ratio would have been
2.2%**, 2.0%, 1.5% and 1.5% for the period ending March 31, 1996 and for the
years ended September 30, 1995, 1994 and 1993, respectively, and 2.8%** for the
period ended September 30, 1992.
****<F18>The ratio of net investment income prior to adviser's expense
limitation undertaking to average net assets for the period ending March 31,
1996 and for the years ended September 30, 1995, 1994 and 1993 and the period
ended September 30, 1992 would have been 4.1%**, 4.5%, 4.8%, 4.6% and 2.9%**,
respectively.
The accompanying notes to financial statements are an integral part of this
statement.
</TABLE>
Reynolds Money Market Fund
STATEMENT OF NET ASSETS
March 31, 1996 (Unaudited)
PRINCIPAL
AMOUNT RATING VALUE
- ------- ------- -----
COMMERCIAL PAPER -- 53.6%
$250,000 Norwest Financial, Inc., 5.55%, due 04/03/96 A1+P1 $249,923
275,000 Merrill Lynch & Co., 5.40%, due 04/04/96 A1+P1 274,876
305,000 Prudential Funding Corp., 5.16%, due 04/04/96 A1+P1 304,869
275,000 American Express Credit Corp., 5.35%, due 04/05/96 A1P1 274,836
300,000 American General Finance Corp., 5.30%, due 04/16/96 A1+P1 299,338
300,000 John Deere Capital Corporation, 5.30%, due 04/16/96 A1P1 299,338
290,000 Chevron Oil Finance, 5.15%, due 05/13/96 A1+P1 288,258
280,000 Texaco Inc., 4.95%, due 05/15/96 A1P1 278,306
280,000 Associates Corp. of North America,
5.32%, due 05/24/96 A1+P1 277,807
280,000 GE Capital Corp., 5.29%, due 05/24/96 A1+P1 277,819
280,000 IBM Credit Corp., 5.24%, due 06/21/96 A1P1 276,699
---------
Total commercial paper 3,102,069
FEDERAL AGENCIES -- 25.8%
300,000 Federal Farm Credit Bank, 5.32%, due 04/01/96 300,000
300,000 Federal National Mortgage Association,
4.94%, due 04/12/96 299,547
300,000 Federal Farm Credit Bank, 5.25%, due 05/01/96 300,000
300,000 Federal Home Loan Mortgage Co.,
4.88%, due 05/17/96 298,130
300,000 Federal Home Loan Bank, 4.93%, due 05/29/96 297,617
---------
Total federal agencies 1,495,294
VARIABLE RATE DEMAND NOTES -- 20.8%
275,000 American Family Financial Services A1+P1 275,000
275,000 General Mills, Inc. A1P1 275,000
275,000 Pitney Bowes Credit Corp. A1+P1 275,000
102,900 Southwestern Bell Telephone Co. A1P1 102,900
275,000 Wisconsin Electric Power Company A1+P1 275,000
---------
Total variable rate demand notes 1,202,900
---------
Total investments (amortized cost $5,800,263) 5,800,263
Liabilities, less cash and receivables -- (0.2%) (A)<F19> (14,405)
----------
NET ASSETS $5,785,858
----------
----------
Net Asset Value Per Share ($0.01 par value, 500,000,000 shares
authorized), offering and redemption price ($5,785,858 / 5,785,858 shares
outstanding) $1.00
----------
----------
(a)<F19>Percentages for the various classifications relate to net assets.
The accompanying notes to financial statements are an integral part of this
statement.
Reynolds Money Market Fund
STATEMENT OF OPERATIONS
For the Six Months Ended March 31, 1996 (Unaudited)
INCOME:
Interest $151,743
--------
EXPENSES:
Management fees 13,740
Professional fees 5,573
Transfer agent fees 3,805
Registration fees 3,279
Administrative services 2,748
Printing and postage 2,394
Custodian fees 1,756
Amortization of organizational expenses 1,593
Other expenses 999
--------
Total expenses before reimbursement 35,887
Less expenses assumed by adviser (18,025)
--------
Net expenses 17,862
--------
NET INVESTMENT INCOME 133,881
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $133,881
--------
--------
STATEMENTS OF CHANGES IN NET ASSETS
For the Six Months Ended March 31, 1996 (Unaudited) and For the Year Ended
September 30, 1995
1996 1995
--------- ---------
OPERATIONS:
Net investment income $133,881 $151,412
--------- ---------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income
($0.0243 and $0.0510 per share, respectively) (133,881) (151,412)
--------- ---------
FUND SHARE ACTIVITIES:
Proceeds from shares issued (7,442,844 and
6,565,456 shares, respectively) 7,442,844 6,565,456
Net asset value of shares issued in distributions
(124,256 and 146,040 shares, respectively) 124,256 146,040
Cost of shares redeemed (5,524,398 and 6,160,428
shares, respectively) (5,524,398) (6,160,428)
---------- ----------
Net increase in net assets derived from
Fund share activities 2,042,702 551,068
---------- ---------
TOTAL INCREASE 2,042,702 551,068
NET ASSETS AT THE BEGINNING OF THE PERIOD 3,743,156 3,192,088
---------- ----------
NET ASSETS AT THE END OF THE PERIOD $5,785,858 $3,743,156
---------- ----------
---------- ----------
The accompanying notes to financial statements are an integral part of these
statements.
Reynolds Money Market Fund
FINANCIAL HIGHLIGHTS
(Selected Data for each share of the Fund outstanding throughout each period)
<TABLE>
<CAPTION>
(UNAUDITED)
FOR THE
SIX MONTHS ENDED
MARCH 31, ENDED SEPTEMBER 30,
-------------------------------------
1996 1995 1994 1993 1992 1991*<F20>
------- ------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment operations:
Net investment income 0.0243 0.0510 0.0304 0.0255 0.0364 0.0358
Less distributions:
Dividends from net investment income (0.0243) (0.0510) (0.0304) (0.0255) (0.0364) (0.0358)
------- ------- -------- ------- ------- -------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
------- ------- -------- ------- ------- -------
------- ------- -------- ------- ------- -------
TOTAL INVESTMENT RETURN 4.9%**<F21> 5.2% 3.1% 2.6% 3.6% 5.5%**<F21>
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's $) 5,786 3,743 3,192 6,798 6,166 3,617
Ratio of expenses (after reimbursement)
to average net assets***<F22> 0.65%**<F21> 0.65% 0.63% 0.67% 0.64% 0.61%**<F21>
Ratio of net investment income to
average net assets****<F23> 4.87%**<F21> 5.08% 2.84% 2.62% 3.53% 5.43%**<F21>
*<F20>For the period from January 30, 1991 (commencement of operations) to
September 30, 1991.
**<F21>Annualized.
***<F22>Computed after giving effect to adviser's expense limitation
undertaking. If the Fund had paid all of its expenses, the ratio would have been
1.34%**, 1.95%, 1.47%, 1.22% and 1.73% for the period ending March 31, 1996 and
for the years ended September 30, 1995, 1994, 1993 and 1992, respectively, and
1.85%** for the period ended September 30, 1991.
****<F23>If the Fund had paid all of its expenses, the ratio would have been
4.18%**, 3.79%, 2.01%, 2.08% and 2.44% for the period ending March 31, 1996 and
for the years ended September 30, 1995, 1994, 1993 and 1992, respectively, and
4.18%** for the period ended September 30, 1991.
The accompanying notes to financial statements are an integral part of this
statement.
</TABLE>
Reynolds Funds, Inc.
NOTES TO FINANCIAL STATEMENTS
March 31, 1996 (Unaudited)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES --
The following is a summary of significant accounting policies of the Reynolds
Funds, Inc. (the "Company"), which is registered as an open-end management
investment company under the Investment Company Act of 1940. This Company
consists of a series of four funds: the Reynolds Blue Chip Growth Fund ("Blue
Chip Fund"), the Reynolds Money Market Fund ("Money Market Fund"), the
Reynolds Opportunity Fund ("Opportunity Fund") and the Reynolds U.S.
Government Bond Fund ("Government Bond Fund") (collectively the "Funds").
The assets and liabilities of each Fund are segregated and a shareholder's
interest is limited to the Fund in which the shareholder owns shares. The
Company was incorporated under the laws of Maryland on April 28,1988.
(a) Each security for the Blue Chip Fund, Opportunity Fund and Government
Bond Fund, excluding short-term investments, is valued at the last sale price
reported by the principal security exchange on which the issue is traded, or
if no sale is reported, the latest bid price. Securities which are traded
over-the-counter are valued at the latest bid price. Short-term investments
held by these Funds and all instruments held by the Money Market Fund are
valued at amortized cost which approximates quoted market value. Securities
for which quotations are not readily available are valued at fair value as
determined by the investment adviser under the supervision of the Board of
Directors. Investment transactions are recorded no later than the first
business day after the trade date. Cost amounts, as reported on the
statements of net assets, are the same for Federal income tax purposes.
(b) Net realized gains and losses on common stock of the Blue Chip Fund and
the Opportunity Fund are computed on the basis of the cost of specific
certificates.
(c) Provision has not been made for Federal income taxes since the Funds
have elected to be taxed as "regulated investment companies" and intend to
distribute substantially all income to shareholders and otherwise comply with
the provisions of the Internal Revenue Code applicable to regulated
investment companies. The Opportunity Fund has $272, $100,665 and $53,303 of
net capital losses which expire September 30, 2000, 2002 and 2003,
respectively, and $127,653 of 1995 post-October losses, that may be used to
offset capital gains in future years to the extent provided by tax
regulations. The Government Bond Fund has $231,245 of net capital losses
which expire September 30, 2003, and $19,651 of 1995 post-October losses,
that may be used to offset future realized capital gains.
(d) The Blue Chip Fund and the Opportunity Fund record dividend income on
the ex-dividend date and interest income on the accrual basis. The
Government Bond Fund and the Money Market Fund record interest income on the
accrual basis.
(e) The Funds have significant investments in short-term variable rate
demand notes, which are unsecured instruments. The Funds may be susceptible
to credit risk with respect to these notes to the extent the issuer defaults
on its payment obligation. The Funds' policy is to monitor the
creditworthiness of the issuer and does not anticipate nonperformance by
these counterparties.
(f) Generally accepted accounting principles require that permanent
financial reporting and tax differences be reclassified to capital stock.
(2) INVESTMENT ADVISER AND MANAGEMENT AGREEMENT AND TRANSACTIONS WITH RELATED
PARTIES --
The Funds have management agreements with Reynolds Capital Management
("RCM"), with whom certain officers and directors of the Funds are
affiliated, to serve as investment adviser and manager. Under the terms of
the agreements, the Blue Chip Fund and the Opportunity Fund will pay RCM a
monthly management fee at the annual rate of 1% of such Funds' daily net
assets; from the Government Bond Fund a monthly fee of 0.75% of such Fund's
daily net assets; and from the Money Market Fund a monthly fee of 0.5% of
such Fund's daily net assets. For the period ending March 31, 1996, RCM
voluntarily waived $9,816 and $13,740 of the management fees due from the
Government Bond Fund and the Money Market Fund, respectively, under the
agreements.
RCM reimburses the Funds for annual expenses in excess of the lowest expense
limitation imposed by the states. In addition to the reimbursement required
under the management agreements, RCM has voluntarily reimbursed the
Government Bond Fund and the Money Market Fund for expenses over 0.90% and
0.65% of the daily net assets of the Funds', respectively. These voluntary
reimbursements to the Government Bond Fund and the Money Market Fund may be
modified or discontinued at any time by RCM.
The Funds have administrative agreements with Fiduciary Management, Inc.
("FMI"), with whom certain officers of the Funds are affiliated, to supervise
all aspects of the Funds' operations except those performed by RCM pursuant
to the management agreements. Under the terms of the agreements, the Blue
Chip Fund and the Opportunity Fund will pay FMI a monthly administrative fee
at the annual rate of 0.2% of such Funds' daily net assets up to and
including $30,000,000 and 0.1% of such Funds' daily net assets in excess of
$30,000,000; and the Government Bond Fund and the Money Market Fund will pay
FMI a monthly administrative fee at the annual rate of 0.1% of such Funds'
daily net assets.
(3) DISTRIBUTION TO SHAREHOLDERS --
Net investment income and net realized gains, if any, are distributed to
shareholders. The Blue Chip Fund declared a distribution from ordinary
income of $25,957 ($0.0158 per share) on December 28, 1995. The distribution
was paid on December 29, 1995, to shareholders of record on December 27,
1995. Dividends from net investment income for the Government Bond Fund and
the Money Market Fund are declared daily and paid monthly. Distributions of
net realized gains, if any, will be declared at least once each year.
(4) DEFERRED EXPENSES --
Organizational expenses were deferred and are being amortized on a straight-
line basis over a period of not more than five years. These expenses were
advanced by RCM who will be reimbursed by the Funds over a period of not more
than five years. The proceeds of any redemption of the initial shares by the
original shareholder will be reduced by a pro-rata portion of any then
unamortized deferred expenses in the same proportion as the number of initial
shares being redeemed bears to the number of initial shares outstanding at
the time of such redemption. The unamortized organizational expenses at
March 31, 1996 were $2,297, $2,297 and $0, respectively, for the Opportunity
Fund, the Government Bond Fund and the Money Market Fund.
(5) INVESTMENT TRANSACTIONS --
For the period ending March 31, 1996, purchases and proceeds of sales of
investment securities of the Blue Chip Fund (excluding short-term securities)
were $5,344,850 and $7,260,570, respectively; purchases and proceeds of sales
of investment securities of the Opportunity Fund (excluding short-term
securities) were $2,508,938 and $476,417, respectively; purchases and
proceeds of sales of investment securities of the Government Bond Fund
(excluding short-term securities) were $0 and $301,969, respectively.
(6) ACCOUNTS PAYABLE AND ACCRUED LIABILITIES --
As of March 31, 1996, liabilities of the Funds included the following:
GOVERNMENT
BLUE CHIP MONEY MARKET OPPORTUNITY BOND
FUND FUND FUND FUND
-------- --------- -------- ---------
Payable to RCM for management fees and
deferred expenses $24,737 $-- $13,679 $2,526
Dividends payable -- 22,929 -- 11,642
Other liabilities 19,499 3,631 16,417 1,646
(7) SOURCES OF NET ASSETS --
As of March 31, 1996, the sources of net assets were as follows:
<TABLE>
<CAPTION>
GOVERNMENT
BLUE CHIP MONEY MARKET OPPORTUNITY BOND
FUND FUND FUND FUND
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Fund shares issued and outstanding $15,837,908 $5,785,858 $9,711,670 $2,681,104
Net unrealized appreciation
on investments 12,198,502 -- 3,857,484 112
Accumulated net realized gain
(loss) on investments 203,396 -- (236,547) (247,974)
----------- ---------- ----------- ----------
$28,239,806 $5,785,858 $13,332,607 $2,433,242
----------- ---------- ----------- ----------
----------- ---------- ----------- ----------
</TABLE>
Aggregate net unrealized appreciation for the Funds as of March 31, 1996
consisted of the following:
GOVERNMENT
BLUE CHIP OPPORTUNITY BOND
FUND FUND FUND
----------- ---------- -------
Aggregate gross unrealized appreciation $12,536,090 $4,756,755 $15,706
Aggregate gross unrealized depreciation (337,588) (899,271) (15,594)
----------- ---------- --------
Net unrealized appreciation $12,198,502 $3,857,484 $112
----------- ---------- --------
----------- ---------- --------
REYNOLDS FUNDS
Wood Island, Third Floor
80 East Sir Francis Drake Boulevard
Larkspur, California 94939
1-415-461-7860
BOARD OF DIRECTORS
FREDERICK L. REYNOLDS
ROBERT E. SNADER
ROBERT E. STAUDER
INVESTMENT ADVISER
REYNOLDS CAPITAL MANAGEMENT
Wood Island, Third Floor
80 East Sir Francis Drake Boulevard
Larkspur, California 94939
ADMINISTRATOR
FIDUCIARY MANAGEMENT, INC.
225 East Mason Street
Milwaukee, Wisconsin 53202
CUSTODIAN, TRANSFER AGENT
AND DIVIDEND DISBURSING AGENT
FIRSTAR TRUST COMPANY
615 East Michigan Street
Milwaukee, Wisconsin 53202
1-800-773-9665
1-414-765-4124
INDEPENDENT ACCOUNTANTS
PRICE WATERHOUSE LLP
100 East Wisconsin Avenue
Suite 1500
Milwaukee, Wisconsin 53202
LEGAL COUNSEL
FOLEY & LARDNER
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
